Wolseley profits hurt by tough quarter

The company, which has a major office in Ripon and sites across Yorkshire, kept investors guessing about the future of the underperforming parts of the business.

Chief financial officer John Martin said UK builder’s merchant Build Center is still under review along with other parts of the business and played down recent speculation that it was already up for sale.

“We will improve the performance of these businesses, and then either we classify them for retention in the group or sell them,” he said.

He stressed that units under scrutiny would not necessarily end up on the auction block.

The group, which generates sales of more than £13bn a year and is the world’s largest specialist distributor of plumbing and heating products, said UK profits fell by 10 per cent to £28m in the three months to April 30.

This included a £4m rise in bad debt charges and followed “significantly” lower revenues at consumer-focused Bathstore, which could also be up for sale as Wolseley looks to focus on core trade operations.

Plumbing chain Plumb Center was hit by the loss of a large parts supply contract as well as fewer boiler replacements following the end of the Government’s scrappage scheme a year ago.

Build Center improved its performance while the company’s drain, pipe and climate businesses all did well.

A good showing in the US and Northern Europe helped to lift Wolseley’s sales overall by one per cent in the quarter to April to £3.27bn, but UK revenues fell by four per cent with like-for-like growth also falling sharply to just one per cent from eight per cent in the previous three months.

Group trading profits for the quarter rose by 30 per cent to £131m as the US, Nordic and French operations all posted healthy gains.

On a like-for-like basis, revenues increased by six per cent, even though chief executive Ian Meakins said new house building, which accounts for 20 per cent of group revenues, was subdued in most areas.

Figures out this week showed US house prices at their lowest since the summer of 2006 after a 5.1 per cent fall in the latest quarter, although Wolseley said like-for growth continues to be strongest in the US, with good trends also in the Nordics and France.

The US accounts for about 40 per cent of Wolseley’s business and has been buoyed recently by repair, maintenance and improvement work, which is still holding up.

Mr Meakins, who took over in 2009, has been selling off peripheral businesses to cut debt after the firm slumped into the red as property markets crashed after the credit crunch. Borrowings fell by £109m over the quarter to £824m. For the full year to July, the group is forecast by analysts to make profits of £605m on revenues of £13.6bn.

Mr Meakins added he remains confident of meeting market expectations for the full year.

Build Center had been seen as a likely disposal target, given its weak position in the UK market as the number four in general merchanting, and Wolseley’s ongoing strategy to sell off non-core assets.

There has been speculation this week three of the UK businesses – Build Center, Electric Center and Encon – are on the market, expected to bring in £300m.

The FTSE 100 company indicated in March it was looking at alternatives for its French plumbing and heating unit Brossette including a possible disposal. Mr Martin said the group will update the market on the sale process in October.

He added that the company is exploring a number of bolt-on acquisitions, which will not be incremental.

“We’re looking at a number in the US, we’re looking at a number in the Nordics, one or two tiny ones in the UK. There are probably one or two in France,” he said.

Analyst Keith Bowman, at Hargreaves Lansdown, said: “A lack of business disposal news has hit the shares in early trading. Nonetheless, the figures have broadly matched expectations, with a recovery in the US continuing to lead the way.”

Analysts Seymour Pierce repeated their ‘sell’ rating on the stock, flagging up macroeconomic concerns.

APRIL SHOWERS ON TOPPS TILES

TOPPS Tiles took the shine off a “robust” winter trading performance by revealing weaker-than-expected sales over recent weeks.

The floor coverings specialist said like-for-like sales were down 2.1 per cent in the past seven weeks.

This compares with an increase of 1.8 per cent over the six months to April 2.

While Topps said its performance was “not significantly” different from expectations, analysts warned low levels of housing transactions and consumer confidence remained a drag on short-term prospects.

Mark Photiades, a retail analyst at Singer Capital Markets, added: “April trading conditions were clearly tough given the warm, dry weather and we suspect the DIY sheds may well have picked up some share in this period.”